Changes to the VAT Flat Rate Scheme
From 1 April 2017 the VAT Flat Rate Scheme will be changing for some small businesses. Currently the flat rates percentages range from 4% to 14.5% depending on the type of business. The new percentage is 16.5% and applies to businesses with low expenditure relative to their sales. The test is if the VAT inclusive expenditure is either less than 2% of the VAT inclusive turnover or less than £250 per quarter then the new rate applies. Certain types of expenditure are excluded: Vehicles and other capital items. Food and drink purchased by the owners / employees. Unless the business is providing transport services such as couriers and taxis then the value of fuel and parts are also excluded. If you think your business may be affected by the changes to the Flat Rate Scheme, then it is worth checking using the criteria above and then comparing your VAT liability to the standard basis. For many small businesses it is worth considering leaving the vat flat rate scheme and returning to standard accounting. As always, we’re here to help. Get in touch if you’d like some help or...
read moreAxe the Tenant Tax – Buy-to-let mortgage tax relief setback
In October 2016, the group legally challenging the government’s decision to cut tax relief on buy-to-let loans, suffered a setback when their challenge was rejected by a judge advising that it was “bound to fail” and therefore should not proceed to court. The group is called “Axe the Tenant Tax” and was represented by Cherie Booth QC who owns buy-to-let properties and therefore has an interest in the case. If the challenge had been successful then the plan would have been put on hold until the courts had time to consider the case in full. What are the changes to buy-to-let mortgage tax relief? Starting in April 2017 and over a period of 4 years, tax relief at higher rates will be phased out for interest on loans to buy or improve buy-to-let residential properties. Therefore from April 2021, the maximum tax relief will only be available at the basic rate. If you are a basic rate tax payer only, then you won’t be affected. If you think you may be affected please don’t hesitate to get in touch to see how we can help you. Courtley West Chartered Certified Accountants Wakefield ...
read moreHMRC – Making Tax Digital
Below is a brief summary about the ‘Making Tax Digital’ consultations and proposals from HMRC. HMRC’s vision is for businesses to be able to easier understand and manage their tax affairs. It wants to make greater use of the information that it already holds such as bank and building society interest to make things easier on the tax payer without them having to compile this information again. Digital record-keeping will be required from 2018 for most businesses, sole traders and landlords in order to report quarterly to HMRC. HMRC aren’t looking to become software providers, they will expect the tax payer to use third party software although they are trying to ensure free options are available. Those with income below £10,000 will not be required to use the new ‘making tax digital’ system. Further thresholds haven’t been decided yet. This is being looked at while HMRC are reviewing how they can simplify the tax system. Other areas they are looking at are the thresholds for cash vs revenue accounting and similar areas. One thing we can say for certain is that tax administration in the UK will look very different in 5 years time. At Courtley West we keep up to date on all the current developments at HMRC and we proactively engage with many of our clients using the cloud based book-keeping systems which ultimately will be very instrumental in the delivery of the quarterly reports. As always, if you have any queries about how this may affect you or you’d just like to know how we may help your business, please get in...
read more2016 Budget Summary
On 16 March 2016 George Osbourne presented his budget, the budget was followed by the publication of the finance bill on the 24 March. Here are the top key points affecting small business. Personal Allowance For 2017/18 the personal allowance will increase to £11,500 (2016/17: £11,000). The basic rate band will increase to £33,500 (2016/17: £32,000), resulting in a higher rate threshold of £45,000 for 2016/17. We have been told that the higher rate threshold will increase to £50,000 by the end of this parliament. New Lifetime ISA From April 2017 those under the age of 40 will be able to subscribe to a ‘Lifetime ISA’. Subscribers can pay in up to £4,000 a year until the age of 50 and receive a government bonus of 25%. Contributions to a Lifetime ISA will count towards the ISA contribution limit which will be set at £20,000 for 2017/18. Funds can be withdrawn without charge when the subscriber reaches 60 or purchases their first residential property worth £450,000 or less. The ISA will be ‘flexible’ and funds can be withdrawn at any time before the age of 60, subject to the subscriber losing their bonus (including any interest or growth thereon) and paying a 5% charge. More details should be released in Autumn 2016. Class 2 National Class 2 NICs will be abolished from April 2018. 4 NICs will be reformed so that the self-employed will continue to build entitlement to contributory benefits following the abolition of Class 2. We would expect an increase in the Class4 NIC rate, although this has not been announced yet. Micro-businesses allowances Two new allowances of £1,000 each were announced by the Chancellor, to be introduced from April 2017. The allowances are available for property and trading income and are aimed particularly at micro-entrepreneurs carrying out activities such as selling goods or letting their homes through online marketplaces. Individuals with trading or property income below £1,000 will no longer be required to declare or pay tax on that income. Whilst detailed information on these two new allowances is not available at the time of writing, we do know that they will work in a similar way to rent a room relief: if income from property or trading exceeds £1,000 the taxpayer will have a choice between deducting actual expenses from income or deducting the £1,000 allowance from income. Corporation Tax Rates The planned reduction in the rate of corporation tax to 19% on 1 April 2017 will go ahead as planned. 1 April 2020 the rate will drop to 17%. Loans to participators This will affect any client with an over-drawn director’s loan account. The rate of s455 tax will increase from 25% to 32.5% from April 2016. The new rate will apply to loans made or benefits conferred by close companies on or after 6 April 2016. Planned reduction in CGT rates One of the headlines from the 2016 Budget was the reduction of Capital Gains Tax rates from April 2016. The basic rate will reduce to 10% (from 18%) and the higher rate will reduce to 20% (from 28%). An 8% surcharge rate will apply to gains on residential property and carried interest, effectively keeping the rates exactly as they were. ATED related gains will also be chargeable at 28%. Trustees and personal representatives will...
read moreThe Town That Took on the Taxman
There was a great programme on the TV last night. “The Town That Took on the Tax Man’” You can catch up with it on iPlayer here: http://bbc.in/1nnmfQJ A group of traders from Crickhowell, set up a multinational tax avoidance scheme using the same techniques used by the likes of Starbucks, Amazon & Facebook to highlight the inequality in the tax system.* It comes to light that these large corporations have a special relationship with HMRC, they also have very expensive barristers and accountants and the deep pockets required to pay them in order to fight off HMRC when they are ultimately challenged. The sad truth is that the tax system is unfair. As a small business the relationship with HMRC is very different. You can be on the phone, listening to their on-hold music for an hour before ‘the computer’ will decide you should try again later and hang up. They will write to you with a deadline which has already passed by the time the letter is delivered and they will not respond to your letter for several months. So, the question I suppose many are asking is, can I set myself up an offshore company? Can I have a Dutch Sandwich? For many SMEs the answer will be no. The tax saved will be less than the legal fees in getting such a scheme set up and then successfully defended. It’s still not fair though is it? That’s what really hurts, we’re writing out the cheques while the multinational corporations are cutting deals. We’ll help our clients minimise their tax liability within the legal framework available, more importantly we’ll guide our clients through their business growth ensuring they know what they’re doing and are profitable. At the end of the day, we all should pay our taxes if we want to have an NHS, state-pension, roads and the emergency services etc but we would like to think it’s fair. Perhaps if the multinationals played along then the SMEs wouldn’t have to pay as much. I hope we get to find out how the Crickhowell traders get on, ultimately I think they’ll get stuck but good on them for trying and highlighting the inequity in the system. *I think Amazon and Starbucks have rearranged their tax affairs to ensure they do pay UK Corporation tax...
read moreIs VAT recoverable on car derived combi-vans?
HMRC have issued a list of makes and models of car derived vans and combi vans which VAT registered businesses can use to determine if the VAT paid on the purchase can be reclaimed as input tax. The issue is that VAT will normally be claimable in full on the purchase of a commercial vehicle. However if the vehicle purchased is a passenger car VAT is not recoverable unless it is used ‘exclusively for the purposes of a business’. Generally cars are therefore VAT ‘blocked’ and no input VAT is recoverable. The VAT guidance states: ‘Motor car means any motor vehicle of a kind normally used on public roads which has three or more wheels and either: a) is constructed or adapted solely or mainly for the carriage of passengers; or b) has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows’ Whether or not a vehicle is commercial is not specifically defined but instead the definition of a car excludes: vehicles capable of accommodating only one person or suitable for carrying twelve or more people including the driver vehicles of more than three tonnes unladen weight caravans, ambulances and prison vans special purpose vehicles such as ice cream vans, mobile shops, hearses, bullion vans and breakdown and recovery vehicles vehicles constructed to carry a payload of one tonne or more. Many car derived vans are not cars for VAT purposes as they have no rear seats, have metal side panels to the rear of the front seats and a load area which is highly unsuitable for carrying passengers etc. HMRC have issued the clarification due to developments in the car derived van market, as some vehicles with a payload of less than one tonne have ‘blurred’ the distinction between cars and vans. If you would like help with this or any other VAT issue please contact us. Internet...
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